Senate wants to study Ky. Teachers Retirement System instead of authorizing bonds
03/09/2015 06:34 PM
FRANKFORT – Rather than authorize $3.3 billion in bonds to fund the Kentucky Teachers’ Retirement System, the Senate Standing Committee on Local Government supported a plan to study what will work best over the interim and have plan in place for the 2016 budget session.
House Bill 4, sponsored by House Speaker Greg Stumbo, D-Prestonsburg, would have authorized up to $3.3 billion in bonds to reduce the nearly $14 billion unfunded liability of the Kentucky Teachers’ Retirement System.
Senate President Robert Stivers, R-Manchester, offered a committee substitute, which was passed 7 to 3 along party lines. The substitute would establish a task force to look at what is needed to help fund the deficit.
“We need to look at the complexity of that to make sure that we make sound decisions, and when we come back in a budget cycle in 2016, be prepared what we need to do to make fiscally responsible decisions to meet the commitments of paying our teachers and our retired teachers, that which they’ve earned,” Stivers said.
Sen. Dorsey Ridley, D-Henderson, expressed concern that the commonwealth, because of the current positive interest rates, might be missing an opportunity to make more money with authorizing bonds now. A statement Sen. Damon Thayer, R-Georgetown, disagreed with.
“Just the fact that we knew this was coming and I just think we’re kicking the can down the road,” Ridley said. “We’re at historic low interest rates that are available to us.”
Thayer responded by using Illinois as example.
That state closed the last fiscal year with $97.5 billion in unfunded pension liabilities. And pension bonds made up more than $14 billion of the state’s nearly $27 billion in general obligation bonded debt.
“I have one world for those who are proponents of borrowing $3.3 billion,” Thayer said. “Illinois.”
While Jefferson County Teachers Association President Brent McKim expressed disappointment that the Senate committee chose not go the bond route in 2015, he is happy that there is discussion among lawmakers about the KTRS deficit.
“We see that the Senate and the House now both acknowledge that this is a huge problem for the commonwealth that needs to be addressed and addressed immediately,” McKim told Pure Politics. “A year ago, we were still trying to explain that it really was a problem to people.”
Before Monday’s session, Stumbo expected the Senate to gut his proposal, but he warned that the clock is ticking if bonds are to be used as part of the solution.
“It’s not a bad plan but we just can’t let it go too long or we’re going to lose this window of opportunity for bonds if we’re going to use bonds,” Stumbo said.
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